Affected by rising financial expenses, the 2016 performance growth rate slowed: On February 28, the company released its 2016 performance report. It expects annual revenue of 2.56 billion yuan and net profit attributable to the parent company of 550 million yuan, a year-on-year growth rate of 15%. The company's net profit growth rate has slowed compared to 2015, mainly due to the increase in the company's balance ratio due to the investment and construction of rail transit projects in the Shenyang New Area, which has led to an increase of more than 50 million in annual financial expenses compared to 2015. The fixed capital increase is in place, which is beneficial to the company's third strategic transformation. On January 20, the company announced a private offering of 263.62 million shares at a price of 11.38 yuan/share, raising a total of 3 billion yuan in capital for “rail vehicle manufacturing and deep processing of aluminum profiles”. Currently, the listing of the additional shares has been completed. It is worth noting that since 2015, the company has fully mobilized endogenous financing channels to carry out project investment and construction in the Shenyang New Area, demonstrating the company's firm determination to promote high-end rail transit projects. On the other hand, the improvement of projects under construction has also increased the company's financial burden. The success of this fixed increase is expected to ease the pressure on the company's tight capital chain in the early stages and lay the foundation for the company's third forward-looking strategic transformation. The Shenyang New Area project was put into operation rapidly, and growth is extremely strong. First, the project planning has a large production capacity, opening up space for the company to grow. Including the production capacity of 1,000 vehicles and a deep processing volume of more than 60,000 tons, the company announced that it had achieved an average annual sales revenue of 12.4 billion yuan after delivery, leading to a net profit increase of 1,091 billion yuan. Second, deep processing has been put into operation rapidly, downstream demand is strong, and future orders are expected to gradually increase. At present, the deep processing project was put into operation in September of last year, and orders from major domestic and foreign customers such as 3C and automobiles are expected to gradually land, laying a solid foundation for performance growth in 17-18; third, rail transit projects are being built rapidly, and rail transit orders have huge potential. We expect rail transit projects to be successfully put into operation before the end of the year, and domestic and foreign rail transit orders are expected to gradually be implemented, providing strong support for further growth in the company's performance. The company has “five success genes”. Since its listing, the company's revenue has continued to grow rapidly, and the compound profit growth rate has remained above 20%: first, private enterprises do aluminum processing, and have significant institutional advantages; second, the strategic layout is extremely forward-looking, extremely sensitive to downstream market development trends, and continues to enter the new blue ocean; third, develop in depth to eat up the profits of the entire industry chain; and fourth, cooperate closely with leading global equipment manufacturers to continuously introduce and learn technical know-how of core equipment. Fifth, give full play to the advantages of the Northeast location and build a diversified, stable and high-quality customer base. Improve both internally and externally, and advance towards a high-speed rail vehicle supplier. Liyuan Refining's transformation into a high-speed rail vehicle manufacturer is in line with its consistent logic of the “Five Success Genes” and the “Belt and Road” national strategy to export low-cost superior production capacity to the outside world. First, construction of domestic subway projects is in full swing, and the company is expected to use technology, cost and location advantages to gain market share. Second, demand from overseas markets is huge, and the foreign rail transit equipment market is rising steadily. The company announced a fixed increase plan and the production capacity of 1,000 vehicles is conservatively estimated to bring a net profit increase of 1.05 billion yuan. Third, Li Yuan used Mitsui & Co.'s technology and sales network to borrow ships to avoid direct competition with CRRC in China and share huge overseas markets. Fourth, compared with state-owned enterprises, companies have stronger cost advantages and business model characteristics when exporting production capacity to foreign countries. Investment advice: Buy-A investment rating, target price of 18 yuan for 6 months. We expect the company to have net profit of 550 million yuan, 710 million yuan and 1.15 billion yuan from 2016 to 2018, with net profit growth rates of 15%, 30%, and 60%. The increase in performance comes from the commissioning of rail transit aluminum profiles, car body projects, and the continued expansion of deep-processing products. Considering that this high-speed rail project will shift the company's main business to parallel aluminum processing and high-end manufacturing, opening up a wider overseas blue ocean, giving the company a dynamic price-earnings ratio of 30x after dilution in 2017. Risk warning: The commissioning progress of rail transit and deep processing projects falls short of expectations, and downstream orders are insufficient